Why more is actually less- the new Finance function and financial literacy

There have been great strides in accountancy and technology over the last 30 years. In the early days we had basic accounts packages which could cope with double entry bookkeeping and the odd purchase order system, stock control module and fixed asset registers. Then along came ERP systems which took business processes to a greater level and meant that we were all accountants now. The pioneers such as SAP were expensive but could transform every level of business and make them infallible. Regrettably this did not turn out to be the case. Ultimately the trial balance ended up with things in the wrong place and fundamental differences about profit debits and balance sheet debits (as well as the odd suspense account) remained until the accountant came to the rescue with a journal. Nowadays if there are bad posting habits in ERP systems, sweeping journals don’t work anymore, the whole transaction has to be reversed from the original data entry point and so if you have very old GRNI which have hung about for a while and don’t actually exist then the blanket journal approach won’t work.

Generally Accountants in business with these sort of systems spend more time than  ever tracing transactions back to the at-fault inputter and correcting behaviour rather than numbers.

The current vogue is to replace Accountancy with Business partnering – Accountancy is dead because it is now wholly automated. Unfortunately the old acronym of GIGO still applies so more time has to be spent correcting errors of transactional accounting and with an added layer of compliance, the Business partnering gets neglected..

So how can we be effective Finance business partners and do we still have to be mindful of stakeholders and their requirements for financial and non-financial information which should in theory be automatically created and easily accessed?

What does this strategic partnership look like? It requires finance to deliver data that goes way beyond the general ledger information that legacy systems were designed to record. With a wider set of stakeholders and a business landscape that is continually evolving, finance is being asked to provide the operational personnel with real time specific information that can assists decision-making and, for the most part, is struggling to get this right.

The Finance Function is therefore evolving. It now has to should facilitate faster access to relevant data, better reporting, and stronger built-in internal controls. Older ERP systems strain to keep this in mind and more recent ERP systems don’t have any built in processes that can wipe clean past data misdemeanours without considerable effort. As a result, finance technology has become a complex mix of acquisitions, custom integrations, and middleware.

Bolting on ‘fixes’ may address some issues but the role of the Finance function is now about raising financial literacy and attention to detail ( e.g get the date right please) so finance personnel simply have to get involved in operational processes and talk to data input personnel.

ERP systems need rethinking and become much more Accounting friendly and not allow short cuts in posting cash unallocated, so basic rules of engagement with such systems should be clear and concise and influence behaviour.

If we want the Finance function to function effectively then we are all accountants now and we are also all data handlers, programmers and decision makers, so business just got more complex and IT literacy has to be improved.

The challenge therefore is for everyone to have a thorough understanding of what the Processing system is trying to achieve and it starts with outcomes.

If organisations truly want their finance functions to become business partners. Don’t be surprised when they become HR experts and get involved in recruitment and IT knowledge becomes a pre requisite for any advertised vacancy